From the President’s Desk

November 2012

After years of discussion, debate and deliberation, an independent group of private company investors, lenders, preparers and auditors will gather for the first time on December 5th and 6th to begin addressing the complex task of deciding whether and when to make exceptions or modifications to U.S. GAAP for private companies.

The work that lies ahead for the new Private Company Council will not be easy – but it is essential. In a nutshell, the ten members of the PCC will meet at least five times a year to do two very important things.

First, the PCC members will look at U.S. GAAP as it exists today to determine whether there are areas where exceptions or modifications for private companies are warranted. If so, the Council will deliberate and then approve specific recommendations by a supermajority vote. The FASB will decide whether to endorse the proposed changes by a simple majority. If it does, the changes will be subject to an extensive outreach process, including the opportunity for public comment, and final votes by both the PCC and the FASB before being incorporated in to U.S. GAAP.

The second major responsibility of the PCC will be to serve as the principal advisory body to the FASB on the appropriate treatment for private companies for items under active consideration on the FASB’s technical agenda. In either case, the work of the PCC will require its members to be thoughtful, open, and mindful of the interests of all affected parties.

When the Board of Trustees announced the establishment of the PCC last May, it was clear that the Council’s success would depend on establishing a broad-based, diverse group of open-minded members whose professional and personal experience together would comprise the many spheres of private company accounting – users, preparers, auditors.

The Trustees and I were very pleased at the overwhelming response to the call for nominations, which ultimately yielded more than 100 nominees from all walks of private company life. On the one hand, the depth and breadth of the response it made it very difficult to select Council members – in fact, many highly qualified candidates could not be appointed because of the need to carefully balance the group’s membership. But the high level of interest also led to the appointment of a Council that is exceptionally well equipped to deal with the tasks at hand.

Each of the newly appointed PCC members has demonstrated a strong appreciation for the importance of independent standard-setting, and an unwavering commitment to greater clarity and well-informed decision-making in private company financial accounting and reporting.

Let me start with the PCC chairman, Billy Atkinson.

Billy M. Atkinson served as chairman of the National Association of State Boards of Accountancy (NASBA) from 2009 to 2010. He has 39 years of experience in public accounting as a practicing CPA serving private company clients. In talking with Billy, he has shared his view that “the keys to our success will be mutual respect between the PCC and the FASB, which I am confident we will achieve, and the ability to obtain meaningful feedback on all issues from private entity stakeholders.” He looks forward to getting to know his fellow PCC members and holding the inaugural meeting in December.

Every project that the PCC adds to its agenda is intended to provide investors and other users of private company financial reports with the most useful and transparent way to understand and analyze underlying economic transactions and conditions. With that in mind, the Trustees selected highly-qualified users of private company financial statements from both the lending and investment communities:

Steve Brown has 31 years’ experience in community banking. He currently is a VP and manager, Community Banking, at U.S. Bank, where he specializes in credit administration, portfolio quality, credit review, commercial lending and financial analysis.

Neville Grusd is president of Merchant Financial Corporation. He has substantial experience in asset-based lending and factoring and was chief lending officer of an FDIC member bank. A familiar face to accounting standard-setting, Neville also previously served on FASB’s User Advisory Council.

Carleton Olmanson is a managing principal and co-founder of GMB Mezzanine Capital, L.P., a private mezzanine firm that invests debt and equity in privately held businesses. He is a member of the Small Business Investor Alliance and the Association for Corporate Growth.

Also important is the perspective of private company leaders and financial statement preparers:

George Beckwith is VP and CFO of National Gypsum Company, a privately-owned wallboard manufacturer. George served on FASB’s Private Company Framework Task Force and was a member of the Committee of Private Companies at Financial Executives International. He also served on the FASB’s Private Company Financial Reporting Committee, the group that preceded the PCC.

Mark Ellis is the CFO of PetCareRx, a national pet pharmacy and was previously the CFO of Michael C. Fina, a private, family-owned and operated fine goods retailer based in New York City. Mark was also a participating observer on the Blue Ribbon Panel on Standard Setting for Private Companies. He also served as a member of the FASB’s Small Business Advisory Committee .

Lawrence E. Weinstock has more than 30 years of business experience and is currently the VP of finance for Mana Products, Inc., a mid-size cosmetic manufacturer and distributor. In July 2004 he was appointed to the FASB’s Emerging Issues Task Force.

In selecting auditors to serve on the Council, the Trustees sought to achieve a balance among the size and focus of the firms for which the new Council members work.

Jeff Bryan is a member of the Dixon Hughes Goodman Professional Standards Group, where he oversees the firm’s Transaction Advisory Services Group. Jeff has served on numerous boards and committees, including the Technical Issues Committee of the AICPA Private Companies Practice Section.

Tom Groskopf is a director and certified valuation analyst for Barnes Dennig, and has 20 years’ experience in public accounting. Tom is a member of the FASB’s Private Company Financial Reporting Committee (PCFRC), where he led efforts to reduce cost for private entities testing goodwill for impairment.

Diane Rubin is an audit partner of Novogradac & Company, LLP, a national public accounting firm. She serves both national and multi-national clients and provides a full spectrum of audit, tax, appraisal, litigation support, and consulting services in a broad range of industries.

To promote a close working relationship between the FASB and the PCC, the Trustees decided that a FASB member should serve as liaison to the Council. Daryl Buck has been selected for that role, to which he brings a strong private company financial reporting perspective. Before he joined the FASB, Daryl spent eighteen years as Senior Vice President & Chief Financial Officer of Reasor’s Holding Company, a private company with $400 million in annual sales. He also served on the Blue-Ribbon Panel on Standard-Setting for Private Companies and was a member of the Board of Directors of FEI.

Daryl will have a key responsibility – to serve as the main point of contact to facilitate communications and integration between the PCC and the FASB. I am confident that Daryl and the rest of the FASB members will work closely and cooperatively with the PCC as the Council and the Board undertake their mutual responsibilities.

As we had hoped, the new Council is well-stocked with individuals with diverse views, backgrounds and experiences in serving private companies. With this roster, I know that we can expect lively discussion and significant movement towards addressing critical issues facing users, preparers and auditors of private company financial statements.

The Trustees and I owe a deep debt of gratitude to all of those who were nominated to serve on the Council. As a group, the candidates were exceptionally well qualified, which made the selection process both a pleasure and a challenge. Our hope is that everyone who expressed an interest in serving will continue to offer their thoughts and expertise as the Council begins its work – and that would represent a major contribution to the Council’s success.

On behalf of the FAF Board of Trustees, I thank you for your interest in our efforts to improve standard setting for private companies and hope you’ll continue to follow the PCC’s efforts.